If you stopped working today and continued to live at your current standard of living, how long would you last? If you could last a month, then you are one month wealthy. If you could last five years, then you are five years wealthy. And if you could last forever, then you are indefinitely wealthy.”

— R. Buckminster Fuller

Many people interpret this to mean, ‘If I need $4,000 per month to live on and I have $400,000 saved up, then I am 100 months wealthy.’

However, there is a much better way to look at this concept. What if your $400,000 produced passive income, income you received without having to work? For example, what if you made 12% in passive income from investing in certain stocks with your $400,000? Twelve percent of $400,000 is $48,000, so your $400,000 could give you $48,000 in income. When you divide that yearly income by 12 months, it amounts to $4,000 per month. You could live off that income indefinitely and be financially free. You would never have to work again.”

— Van K. Tharp

You might wonder if the $4,000 per month that person needed for financial freedom included taxes. It should, but if you meant $4,000 per month after taxes, then you either have to minimize your taxes or include them in your monthly number. The good news is that you’ll pay much less in taxes on passive income than you will on earned income. When your money works for you, the returns don’t get taxed by nearly the amount that your income gets taxed when you work for money.”

You may make a lot of money in the bitcoin bubble. Or lose it. Either way, don’t take it seriously. You should treat it like a dollar bill on the sidewalk. If you are lucky, you will pick it up before it blows away. If you are unlucky, you will chase it into the busy street and be struck by a crosstown bus.

Easy come, easy go – like an uninvited relative. Neither celebrate its coming… nor shed a tear at its departure.

At its core, bitcoin represents the replacement of trust through institutions with trust through networks.

Why does this matter?

Because for centuries, to coordinate any activity between large numbers of people, we had to have something to trust. And until now, the best answer to that problem of trust was institutions.

Institutions are collections of people governed by rules and policies that have attempted to create trust through tradition, reputation, and longevity. But institutions of trust are failing. And they are failing all over the world.

They are failing when they are newspapers. They are failing when they are political institutions. They are failing when they are banks.

And the reason they are failing is that they represent systems of scale for industrial nation-state societies. And we are no longer industrial nation-state societies.

Instead, we are now information societies on a global scale. We are now trying to solve problems that affect not just 70 million people in one country, but the 7.5 billion people on one planet. And for problems of that scale, and for collaboration on that scale, traditional institutions do not work. They fail to scale.

They are not evil. They are not deliberately corrupt. They simply fail to solve the problems of a global society.

And yet just as we have seen these institutions fail, we have also seen the emergence of new systems of governance, new systems of global collaboration – systems that do allow us to collaborate, communicate, and solve problems at scale.

The first of those systems was the internet. And with that, we saw the first system of communication that transcended nations… that transcended borders… that allowed anyone, everywhere and anywhere, to communicate.

Bitcoin represents that happening to money.

It represents a network-centric system of money that is beyond the nation state… that allows people to collaborate on a global basis… that allows anyone, everywhere and anywhere, to participate in a global economy – without barriers, without ID, without credentials, simply through the act of running software.”

People are always willing to take money from their future self, but then that puts the future in danger. So we have to work on getting people to think about how much they are really spending and also how they can invest in the future. That will take more of an effort as technology makes spending money easier to do.” “If you think about an environment in which we have to think long-term and abstractly, that’s just not something we’re good at. Saving is about now versus later, it’s about concrete versus abstract, and we don’t do those well.”

One of prospect theory’s most important contributions to finance is loss aversion, the idea that for most people, losses loom larger than corresponding gains. The empirical evidence suggests we feel losses about two to two-and-a-half times more than we feel gains. Loss aversion is a clear-cut deviation from expected utility theory.”